Severn Trent's results were accompanied by much-anticipated news on the group's dividend policy for the next regulatory cycle.The water utility didn't disappoint with a promise of growth of retail price inflation (RPI) plus 3 per cent each year until 2015. Finance director Mike McKeon said this level, which is about the middle of the range of dividend growth pledged by peers, was set after first-half cost-cutting instilled confidence.
Having restructured the back-office support functions and cut 275 roles out of 1,100, the group will make annual savings of £10m, with £5m expected in the current financial year. Moreover, the group's front-office staff are now under review, with Mr McKeon stating: "You either do the same amount of work with less people or more with the same; that's what our efficiencies will now be about".
However, despite these operational improvements, as well as a small increase in revenues on the back of higher household consumption, adjusted pre-tax profits excluding derivative movements still fell 16 per cent to £158m. This was predominantly due to higher depreciation charges on an increased asset base and a small increase in non-staff costs. Full-year capital expenditure is expected to be between £415m and £425m, in line with the £2.2bn programme over the regulatory period.
Evolution Securities forecasts adjusted pre-tax profits of £288m and EPS of 94.9p (£338m and 125p in 2010).
Severn Trent (SVT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,467p | MARKET VALUE: | £3.48bn | |
| TOUCH: | 1,465-1,466p | 12-MONTH HIGH: | 1,475p | LOW: 982p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 387p | NET DEBT: | £3.72bn | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 852 | 208 | 63.4 | 26.7 |
| 2010 | 868 | 101 | 43.9 | 26.0 |
| % change | +2 | -51 | -31 | -3 |
Ex-div: 1 Dec Payment: 14 Jan | ||||
